Howard warns of pensions 'time bomb'

He said a Tory government would add £10 to every £100 someone saved towards their pension pot, a move the party says could boost retirement income by up to £500 a year for a person on average earnings.

Around 10 million taxpayers would benefit from the scheme from April 2006, the party believes.

Launching the package, the second of the party's proposed tax cuts totalling £4 billion, Mr Howard said: "When I meet people, they often say to me 'Too many politicians are interested in the short term, tomorrow and next week, rather than 10 years' time'.

"We are announcing a detailed, carefully considered and fully costed proposal to repair the long-term damage done by Mr Brown's pension tax. Only by encouraging more people to save can we ease their anxieties about their long-term security and give our economy a brighter, better future."

Mr Howard said it was vital for younger people to save now for their retirement, something a Labour Government "obsessed with short-term headlines" had failed to do.

He said that after imposing a "£5 billion annual stealth tax" on pensions, the Government had created "a time bomb that threatened people's sense of security".

He said that nearly half of the workforce were putting nothing aside for their retirement yet by 2050 there would be only half as many workers to support each pensioner as today.

Faced with the pension "time bomb", Tony Blair had handed the issue to a commission that would not report until after the election and Liberal Democrats "simply have nothing to say at all".

Mr Howard said the £10 would be paid to people whether they had personal or company schemes.